Flexible ISAs - part-transferring redeposited funds

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
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AshenAshen Forumite
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edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
Hi,

I have a flexible ISA which I withdrew money from earlier this tax year to put the balance into bank accounts for higher interest. Given recent changes, I would like to transfer some into my S&S ISA earlier than planned.

Can I replace some of the money and then do a part-transfer? The reason I ask is that you can only part-transfer previous years allowances, and want to check that withdrawing and repaying back previous years allowances in a flexible ISA means you can still do a part-transfer.

Thanks :)

Replies

  • masonicmasonic Forumite
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    Yes, any replacement subscriptions are treated as if they were never withdrawn. So if you have previous year money you can partially transfer it even if some or all of it was flexibly withdrawn at some point.
  • jamesdjamesd Forumite
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    You can also part transfer from cash ISA to S&S ISA using current year money. If you have subscribed new money to a S&S ISA in the current tax year the transfer of current year money must be to the same S&S ISA so you end up with only one S&S ISA holding current year money (see paragraph 3.14).

    So far as the need to repay any current year money into the flexible ISA it was withdrawn from HMRC has this to say:

    "3.15 ... In the case of a flexible ISA, withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule (see paragraph 6.80)"

    "6.80 Flexible ISA withdrawals are deemed to be firstly of current year subscriptions, and secondly of previous year funds. Replacements are deemed to be firstly of previous year funds, and secondly of current year subscriptions.

    Managers do not need to establish or record whether a replacement subscription relates to current or previous year subscriptions (or any related income or growth).

    Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule.

    For example, Mr Andrews subscribes £10,000 to his flexible cash ISA on 6 April 2016. On 12 May he withdraws £2,000. His ‘net’ current year subscriptions at this point are £8,000 and he can use the balance of his annual subscription limit of £7,240 (£15, 240 less £8,000) as he chooses between his cash ISA and any stocks and shares, or innovative finance ISA he subscribes to in 2016 - 17. He cannot subscribe to another cash ISA in the year.
    "

    What all that means is that if you withdrew any current year money you would have to replace enough old and new money to soak up all the past year money and then the current year money if you wanted to pay it back into the flexible cash ISA. Instead of doing that you can just pay the current year money into the S&S ISA without replacing it in the cash ISA.

    Previous year money does have to be repaid into the flexible ISA it was withdrawn from (see 6.82) then transferred, so your plan is right for that.

    Part of the reason I mention this is just in case you actually did withdraw some current year money from the flexible cash ISA.
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